Source: Investing Published 10/30/2024, 11:43
JPMorgan Chase & Co. on Wednesday upgraded Hong Kong Land Holdings Ltd. (HKL:SP) (OTC:HNGKY) from “underweight” to “neutral.” The financial firm also raised its price target on the company’s stock to $4.10, up from the previous target of $2.85. The revision comes after Hong Kong Land recently released a strategic review that included long-term goals for 2035.
Hong Kong Land unveiled its strategic review, setting numerical targets that forecast a compound annual growth rate (CAGR) of 5.9% in earnings before interest and taxes (EBIT) and dividends per share (DPS), along with an 8.7% CAGR in assets under management (AUM).
JPMorgan Chase & Co. noted these targets positively, particularly highlighting the company’s commitment to mid-single-digit annual dividend growth, a rare commitment in the sector, with Swire Properties being a notable exception.
The JPMorgan Chase & Co. analyst expressed a positive view of Hong Kong Land’s commitment to dividend growth. However, he took a more conservative stance on the new strategy itself, noting that Hong Kong Land’s reputation as a premium commercial property owner is already well established and that the planned exit from residential development is likely to happen organically. Additionally, the analyst noted that capital recycling may be slow given current market conditions.
The upgrade to “Neutral” reflects a moderate view of the company’s prospects, acknowledging the positive aspects of the strategy while also considering potential challenges in execution. The new target price of $4.10 implies a projected dividend yield of 6% for fiscal 2025, which is 0.5 standard deviations above the historical yield spread, according to a JPMorgan Chase & Co. analyst assessment.
Investors may view the revised target price and upgrade as a reassessment of Hong Kong Land’s potential to deliver shareholder value over the coming years, based on the company’s strategic goals set for 2035.
